Mr Gupta, a prominent Liberal party donor, was appointed in 2014 after beating former NSW Premier Nick Greiner for the position.

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Labor communications spokesman Jason Clare last year called for the government to sack Mr Gupta after he declined to answer questions at a special Senate estimates hearing.

Labor questioned Mr Gupta's credentials for the role following revelations he was the sole employee, as well as the managing director, of Digital Electronics Corporation Australia.

Mr Clare welcomed Mr Gupta's decision to resign.

"It has been a privilege to chair SBS and I wish the organisation all the best for the future," Mr Gupta said.

Mr Gupta came to the job after the government declined to appoint his predecessor, investment banker Joseph Skrzynski, for a second term. Malcolm Turnbull, then communications minister, had argued for Mr Skzrzynski to be reappointed but was overruled by former prime minister Tony Abbott.

Senator Fifield said the process to appoint a new chair will begin shortly.

"The Government thanks Mr Gupta for his service to SBS and commitment to a multicultural Australia," he said.